NSA Scandal Hurting Tech Industry Bottom Line

American tech companies are feeling the consequences of recently revealed information concerning the extent of NSA’s surveillance operations.

An industry group, the Cloud Security Alliance said last month that 10 percent of its non-US members have cancelled a contract with a US-based cloud provider, and 56 percent said they were less likely to use an American company.

Translated into hard dollar amounts, another report this month from the Information Technology and Innovation Foundation (ITIF) said US cloud providers stand to lose $22-$35 billion over the next three years because of the publicity surrounding the PRISM program. The overall distrust among consumers and businesses in other countries will affect US tech industry bottom line as well. “The risk is that a country like Germany will say you have to be a German company to provide data services in Germany,” Daniel Castro, author of the ITIF report told AFP. “I don’t think that helps anyone. We do benefit from free trade and the robust competitiveness in the tech industry.”

According to the report, the US dominates cloud computing market both inside the US and around the globe. US firms could see loses between 10-20% of the international market over the next few years.

Castro explained that the NSA dragnet “will likely have an immediate and lasting impact on the competitiveness of the US cloud computing industry if foreign customers decide the risks of storing data with a US company outweigh the benefits.”

Some countries in Europe are considering developing their own cloud services that operate within the European legal framework.

Estonian President Toomas Hendrik last month urged the EU to develop its own cloud industry, noting that 95 percent of the services come from US firms.

“Recent months have proven once again that it’s very important for Europe to have its own data clouds that operate strictly under European legislation,” he said.

United States tech companies have been urging the government to be more forthcoming about their surveillance in the hopes this will calm consumer panic. Lack of information and vague answers from the intelligence community has only fueled consumer fears. It was recently reported that NSA agents were using their access to electronic surveillance for snooping on their love interests. With this sort of bad behavior, how can consumers trust their private communications are safe?